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| G20 Finance Meeting - EPA Photo |
Telegraph
With China resolutely refusing to allow the yuan to rise more quickly, the US shifted the debate on the first day of the G20 summit to address trade imbalances, the root issue behind exchange rate clashes.
Timothy Geithner, the US Treasury secretary, told G20 members they should commit to specific trade caps, allowing surpluses and deficits on their current account, the broadest measure of trade in goods and services, to be no more than 4pc of gross domestic product.
China's current account surplus was 5.9pc in 2009, having almost halved from its peak of 10.6pc in 2007. The US, by contrast, had a current account deficit of 3pc last year. In a letter to the G20, Mr Geithner called for a "co-operative effort" on the issue, but said there would have to be "some exceptions" for countries that imported large quantities of raw materials.
The US plan, a way of side-stepping a direct spat over currencies, was backed by Korea, Australia and Canada, but immediately opposed by large exporters such as Japan and Germany.
Rainer Bruederle, the German finance minister, rejected a "command economy" approach, while Yoshihiko Noda of Japan said "setting numerical targets would be unrealistic".
India also said the trade caps would be hard to work out, while Russia said there would be no numerical limits set in the summit's final statement.
Mr Geithner also called for G20 countries to refrain from "either weakening their currency or preventing the appreciation of an undervalued currency". Mr Geithner, who also called for the IMF to monitor the G20's commitments, added: "G20 advanced countries will work to ensure against excessive volatility and disorderly movement in exchange rates."
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